SBA Loan Programs (Small Business Administration)
What’s an SBA Loan?
Put simply, an SBA loan is a small business loan that is partially guaranteed by the government (the Small Business Administration), which eliminates some of the risk for the financial institution who is issuing the loan.
That’s right. It’s not the SBA who is doing the lending. The SBA works with a network of approved financial institutions (typically, traditional banks) that lend money to small businesses more frequently and with better terms because the SBA partially guarantees the loans that these lenders extend to small businesses.
This means that they will back up a part of the loan that a small business receives, so if you’re unable to pay back your SBA loan, the lender know that the SBA will cover the portion that they guaranteed.
Without this partial guarantee—which can cover up to 85% of a loan’s amount, traditional banks will often consider lending to small businesses “too risky.” As such, small business who don’t secure loans guaranteed by the SBA often qualify for less-than-ideal terms, if they’re even able to qualify for a bank loan at all.
However, because SBA loans involve a government entity, their application process is notoriously thorough and often restrictive. If you’re hoping to apply for an SBA loan, you’ll need to prepare a lot of documentation and even more patience.
What Terms Does an SBA Loan Offer?
Depending on your business’s qualifications and which lender you choose to work with, the terms you’ll be able to access with an SBA loan will vary.
Just like any other type of loan, SBA loans come in all shapes and sizes.
While each loan has its own specific qualification criteria (here’s the deal on 7(a) eligibility), talk to your bank or lender about your needs and business profile. Another resource is your local SBA District Office.
Take note, in addition to meeting SBA requirements, lenders will also take into consideration credit factors such as your business cash flow, equity investment, collateral, etc.
Can I Get an SBA Loan?
SBA loans are difficult to qualify for, but they come with some general minimum requirements that can help you understand if your small business qualifies.
If you fulfill these minimum requirements, the answer to “can I get an SBA loan?” isn’t necessarily an automatic “yes.” It’s more like a “it’s possible”, as many different things can affect your loan eligibility.
The Bottom Line on SBA Loans
With some of the highest loan amounts, the longest repayment terms, and the lowest APR’s available to small businesses, SBA loans are the undisputed champion of small business loans. If you can qualify for an SBA loan, then you should almost certainly consider it your very best option for business financing.
If you don’t qualify for an SBA loan today, though, that doesn’t mean you’ll never be able to qualify for one. Contact Federal National Funding today for more information.